Wednesday 01, August 2018 by Matthew Amlôt

Ethiopia opens economy to foreign investment

 

Both domestic and foreign investors will soon be able to invest in the East African nation.

In a surprising move the Ethiopian Government has agreed to loosen its monopoly on several key economic sectors, including aviation and telecoms.

The country will sell minority stakes to both foreign and domestic investors in previous state monopolies such as Ethiopian Airlines and Ethio Telecom. Ethiopian Airlines is already the continent’s largest and fastest-growing airline in terms of fleet size and annual passenger numbers. The airline’s growth has also had an impact on the country’s capital Addis Ababa has grown into the African equivalent of Arabic hubs.

Both MTN, Africa’s largest telecoms operator, and Vodacom have expressed an interest in the Ethiopian market, with a Vodacom spokesman telling Reuters that, “Vodacom has said on many occasions that Ethiopia is an attractive market, so it follows that there would be interest. Naturally this is dependent on what might become available and if it fits within our investment parameters.” It is understood that five per cent will be offered to Ethiopians and 30 to 40 per cent to global telecoms players with at least a year or two of consultation.

In a statement on Twitter Fitsum Arega, Chief of Staff at the Ethiopian Prime Minister’s Office said that, “The ruling party has also pledged to expand ‘mixed ownership’ or allow ‘outright full privatisation’ in other sectors including rail way, sugar, industrial park, hotel and other sectors.”

Ethiopia is Africa’s second largest country by population with over 100 million people and has also been one of the fastest, if not the fastest, growing economy on the continent in recent years. The move to allow foreign investment provides a contrasting approach from the new Ethiopian Prime Minister Abiy Ahmed compared to predecessors.

Quartz has reported that the Government has argued that the policy changes are a crucial part of an overall strategy to boost and modernise the country’s economy, which over the past decade has grown at around 10 per cent. Increasing investment could help solve the country’s growing problem with youth unemployment—although this issue is not as high as in other African nations due to Ethiopia’s burgeoning agricultural sector.

Overall the move seems to be positive for Ethiopia as the country will likely need increased funds in order to finance its fast growth. Indeed, The East African reports that the Government has revealed it will require $13 billion over the next two years to cover oil importation, private investment, upgrading of existing projects and repayment of external debt.

This policy change is the latest in several made by Ahmed’s new Government which include ending an internet blackout and freeing political prisoners. Ethiopia has also recently agreed to implement a peace deal with neighbouring Eritrea that was signed in 2000 following the end of a two-year border war. Ahmed had spent two months normalising relations with Eritrea prior to the agreement.